Checking Out VeriFone’s New Square Copycat

VeriFone, the publicly held company that makes cash registers and other payment processing devices, has revealed a new product that will allow retailers to use an iPad or Android tablet for in-store checkout.

Coincidentally, the new tablet add-on shares several characteristics with the products that Square, the start-up in San Francisco, launched only a few weeks ago.

The unveiling of VeriFone’s device today fuels an ongoing rivalry between the two companies that started back in March when VeriFone wrote an open letter about Square, calling out a potential security flaw in its mobile phone card reader.

Back then, VeriFone claimed it wasn’t attacking Square because of the start-up’s threat, but now that’s much harder to believe. Yesterday, Square announced it raised $100 million in capital at a $1 billion valuation.

VeriFone’s public valuation is roughly four times larger at more than $4 billion.

Both products are similar in that they enable merchants to plug an accessory into the iPad to enable credit cards to be swiped with a magnetic reader. They also both build magnetic stripe readers for mobile phones.

In particular, VeriFone says its new PAYware Mobile Enterprise for Tablets product will be compatible with Apple’s iPad, Samsung’s Galaxy tablets, the Motorola Xoom and others. There’s no pricing yet and pilots won’t be conducted until Fall.

There are some key differences between what VeriFone is doing and what Square is already testing in some markets.

VeriFone says it is going after much larger retailers and also supports debit cards with PIN verification. In addition, it will be compatible with near field communications deployments, like the Google Wallet. VeriFone’s product will also integrate with legacy software such as enterprise resource planning systems.

Initially, Square appears to be going after much smaller retailers and expects users to implement its inventory management software on the device.

As for who won the security tiff between the two, VeriFone claimed victory after Square added encryption to its card readers, following a separate investment by Visa.